Public utility wants to add surcharge to customers' bills to finance solar brownfields project
What's not to like to about a plan to promote solar energy?
Plenty, when it comes to a proposal to develop solar energy at ratepayer expense. That, at least, is the opinion of the New Jersey Division of Rate Counsel and others involved in the sector.
According to the critics, part of the problem with the proposal is that it places most of the risks of the nearly $1 billion investment by Public Service Electric & Gas on ratepayers -- instead of the utility's shareholders.
By far the most aggressive utility in the state involved in advancing solar power, PSE&G, last summer proposed an ambitious $883 million program to develop 233 megawatts of new capacity, mostly on abandoned brownfields and landfills, warehouse rooftops, and parking lots.
The filing is closely aligned with goals voiced by the Christie administration to build new grid-supply projects, which drive down the cost of solar, on land underutilized in New Jersey, rather than on undeveloped acreage such as farms.
But the proposal is contested by the Rate Counsel's office because it relies on surcharges on ratepayers' bills to finance most of the cost of the program. That strategy, according to the state agency, shifts the risk to ratepayers, rather than shareholders, while still guaranteeing the utility a generous rate of return on the investment.
That tact is especially galling to consumer advocates, because it reflects a growing trend among utilities to pay for projects with surcharges on customer bills, instead of investing the company's capital. That approach, they argue, has added millions of dollars to ratepayers' bills.
"Surcharge mechanisms have become big business for the electric and gas utilities in New Jersey and there is every indication that the utilities will continue this trend unless the Board of Public Utilities takes steps to control the proliferation of surcharges,'' said Andrea Crane, a consultant retained by the Rate Counsel in the PSE&G case.
"Ratepayers are putting up all the money. We're shelling out the money and we're paying them a return on it,'' said Stefanie Brand, director of the Division of Rate Counsel. "That's when it becomes really unfair.''
Steven Goldenberg, an attorney who represents large energy users who have high electric and gas bills, concurred. "The bottom line is they want to shift all the risk to ratepayers and those of us who have to pay for it and we are not interested in paying for it,'' he said.
Brand noted that PSE&G is also seeking to pay for a $3.9 billion program to modernize its electric and gas distribution system in the wake of Hurricane Sandy through another surcharge.
Other utilities also rely on surcharges to fund investments. The state has approved such surcharges for water companies in New Jersey in an effort to spur quicker investment in upgrading their infrastructure, some of which is more than 100 years old. During the Corzine administration, utilities were encouraged to ramp up investments in their infrastructure as a way of jump-starting the economy.
According to testimony from PSE&G executives, the cost of the program would be modest, raising the typical residential bill by about $12 a year at the most. Still, it would cost ratepayers more than $900 million until 2017.
The cost, however, could be even steeper, according to Crane. The utility's filing assumes it will get paid $200 for the electricity its systems produce, a much higher price than what is now being paid for solar renewable energy certificates (SRECs), which is closer to $100.
"If market prices fall below $200 per SREC, then the overall cost to ratepayers will be higher,'' Crane said in her testimony in the case.
Some solar firms are backing the PSE&G proposal, particularly its plans to develop solar systems on brownfields and landfills. The company is proposing to spend nearly a half-billion dollars building solar arrays on these locations.
"Our Solar 4 All proposal is in keeping with the governor's Energy Master Plan, which targets brownfields and landfills, which is an underutilized area,'' said Michael Jennings, a spokesman for the utility.
Others agreed. "Frankly, private investors will not invest in projects like this,'' argued Alan Bucknam, chief executive officer of SunDurance Energy, which has developed a solar project in concert with PSE&G on a landfill in the Hackensack Meadowlands. "They see potential environmental risks and a complicated development process.''
But even some of those who support the PSE&G proposal, like Lyle Rawlings, president of Advanced Solar Products, Inc., suggested the state modify it, eliminating provisions to finance solar on warehouse rooftops and parking lots, areas where the solar sector is still investing.
Other solar firms argued that the filing, if approved, would adversely affect market conditions. "The use of ratepayer funds, however, gives PSE&G an unnecessary and unfair competitive advantage in the marketplace,'' said Thomas Lynch, executive vice president of KDC Solar.
Previously published in NJ Spotlight
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